The Importance of Innovation Diffusion in the Renewable Energy Sector

Introduction

Natural balances have been put in serious difficulty, due to a metabolism of a society that is too hectic. In fact, with the development of the economy, degradation and environmental problems become increasingly important. (Zhang et al., 2020). The increase in temperatures and the exploitation of natural resources have caused irreversible transformations, with on average profound consequences also on people's health. (Zhao et al., 2020). Currently it is on the political agendas of all states, the need for the construction of a sustainable economic system that allows an efficient allocation of resources and reduces negative externalities. To achieve the 2°C climate targets, the share of renewable energy must increase from 19% in 2017 to 65% by the end of 2050. Negotiation between stakeholders is needed to set emission and quality standards. Some studies believe that “eco-economic decoupling” should be put into practice. Since the existing scientific literature documents that an increase in GDP exerts a strong environmental pressure, a new economic paradigm should be generated that allows growth in this respect and at the same time aims to reduce environmental impacts. Currently renewable energy is classified as the energy of the future, as it does not generate pollution (Sadorsky, 2014) and allows to improve energy security (Irandoust, 2016) and redesign a new low-carbon society. Technological progress plays a key role; however, care must be taken not to generate what in economics, is called paradox or Jevons effect. This paradox arises because of a series of research and studies conducted by William Stanley Jevons, an English economist, of international renown. In 1865, it observed that technological improvements, instead of reducing consumption, increased them. In fact, the analysis took place by looking at coal mines and how a technological improvement implied an excessive increase in coal consumption. Subsequently, Daniel Khazzoom and Leonard Brookes, revisited and restudied the Jevons model and came to the conclusion that the reduction of energy consumption through an increase in energy efficiency, implies an increase in energy demand. Later Saunders said that greater energy efficiency normally tends to increase energy consumption. This is due to two reasons, from an economic point of view, the increase in efficiency, as a rule, makes the use of energy cheaper, generating what in economics is called the rebound effect. This effect, in line with what is specified, occurs when we have a greater efficiency (in terms of production or in terms of efficiency), it generates a reduction in costs, and a chain increase in demand.

Saunders examined the problem from two profiles, both microeconomic and macroeconomic, and concluded that technological progress certainly improves efficiency, but will generate an increase in overall consumption, causing an increase in demand. Reducing emissions into the atmosphere, in a “frenetic” society and prone to consumerism is not a simple factor, however it is estimated that the reduction of CO2 emissions can take place through four channels, they are:

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  From an economic point of view, one could think of a reduction in economic growth, in fact as a result of the serious economic crisis, emissions into the atmosphere have suffered a 7% drop. However, economic decline causes serious negative impacts in terms of employment.

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  From an energy point of view, one could think of reducing the use of coal and replacing these substances with natural gas and renewables.

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  From a behavioral point of view, one could think of a change in the behavior of individuals to reduce waste and emissions.

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  From a technological point of view, innovation plays a key role in removing emissions. However, it could give rise to some opportunistic behaviour.